Useful Income Tax and Retirement Planning Information

There have been several major tax law changes over the past few years with staggered effective dates. These laws have significantly changed the way you may want to consider your financial situation, especially retirement planning. Here is some information that you find helpful:

Income tax information (2010)

Income tax rate schedules for 2010

2010 Single Return Rate Schedule

Taxable income levels	Tax rate
0 to $8,375	10%
$8,376 to $34,000	15%
$34,401 to $82,400	25%
$82,401 to $171,850	28%
$171,581 to $373,650	33%
Over $373,650	35%

 

2010 Married Filing Jointly Rate Schedule

Taxable income levels	Tax rate
0 to $16,750	10%
$16,751 to $68,000	15%
$68,001 to $137,300	25%
$137,301 to $209,250	28%
$209,251 to $373,650	33%
Over $373,650	35%

 

Taxation of dividends and long-term capital gains

For taxpayers in the 10% and 15% brackets, qualifying dividends and long-term capital gains (assets held for more than a year) will be taxed at 5%. For those in higher tax brackets, the special tax rate is 15%. These preferential rates were scheduled to expire at the end of 2008, but the 2006 tax law changes extended these rates through 2010.

Estate taxes

Year	Estate Size Where Taxation Starts	Top estate tax rate
2009	$3,500,000	45%
2010	No estate taxation
2011	Reinstatement of old (2001) rates with estates over $675,000 being taxed	55%

 

Regular IRA and Roth IRA contribution limits

For tax year	IRA contribution limit	Additional contribution limits for those age 50 and over
2010	$5,000	$1,000

 

401(k) retirement plan contribution limits

For tax year	401(k) deferral limit	Additional contribution limits for those age 50 and over
2010	$16,500	$5,500

 

Education (or Coverdell) IRAs

The annual contribution limit is $2,000 with eligibility phase out beginning at $190,000 (for married filing jointly) and $95,000 of Adjusted Gross Income (some modifications apply).

Annual gift tax exclusion

For 2010, gifts of $13,000 and under are not subject to gift tax.

Social Security

2010 Employee wages subject to Social Security tax of 6.2% - $106,800
2010 Employee wages subject to Medicare tax of 1.45% - no limit
2010 Self employment income subject to Social Security tax of 12.4% - $106,800
2010 Self employment income subject to Medicare tax of 2.9% - no limit
2010 Average monthly benefit for all retired workers - $1,153
2010 Average monthly benefit for retired couples - $1,876
2010 Maximum monthly benefit for a worker at full retirement age - $2,323